Corporate Governance and Business Ethics: An Indian Prospective Gaurav Sharma Legal Article Wed, Oct 11, 2023, at ,10:45 PM Introduction:- Business and society are interrelated to each other in such a way that both find their existence in each other. Business runs in a social environment and largely depends on it for its input or factors of production – land, labour, capital etc. On the other hand business makes various contributions to society such as providing goods and services, creating opportunities of employment and wealth and facilitating various innovations for betterment of mankind. To meet above social needs in sustainable manner, it is must for the business to ‗make profit‘. Thus it can be widely accepted that ‗making profit‘ is not itself an unethical act but making profit without taking care of needs of society is defiantly unethical. Business ethics essentially deals with conceptualizing the right code of conduct for business and understanding what is right and morally good in business. Corporate governance are internationally accepted norms for business and to promote honesty and integrity, to protect the interest of society and stakeholders- customers, shareholders and investors and above all to avoid all types of conflict of interest, whether actual or apparent, in personal and professional relationships. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. Many of the "definitions" of corporate governance are merely descriptions of practices or preferred orientations. For example, many authors describe corporate governance in terms of a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs. However, there is substantial interest in how external systems and institutions, including markets, influence corporate governance. Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization. Corporate governance and business ethics:- The primary objective of a corporation is to increase shareholder value. Successful corporations must operate within society; to that end, they must maintain the values and norms of the society in which they operate. Volkswagen has been the unfortunate recipient of a great deal of press time lately. In case you missed the details, it recently came to light that Volkswagen knowingly deceived the United States Environmental Protection Agency (EPA) with respect to nitrous oxide (NOx) engine emission for their TDI engines.The company programmed the vehicles to favourably behave differently during EPA testing. The engines actually exceeded emission test levels during every day use by roughly 40 fold. The number of affected vehicles is not small approximately 11 million cars worldwide. While the old adage goes that there is no such thing as bad publicity, the company's publically traded market share losses topped 14 billion during the fallout, suggesting otherwise.The scandal has fueled the ire of those who question the altruism and decry the intent of big business. The scandal has thrown the subject of business ethics back into the spotlight. The corporations or organizations surgeons typically navigate are hospitals and universities institutions held to strong social standards of ethical accountability. However, hospitals are not the only organizations we interact with. Governance And The Law:- At the end of the 20th century, public confidence in a corporation's ability to self- govern was low. A number of scandals had shaken the landscape and rattled investor confidence. Concerns about possible economic fallout prompted the United States House and Senate to enact the Public Company Accounting Reform and Investor Protection Act. This is better known as the Sarbanes-Oxely Act of 2002. Sarbanes-Oxely laid out legal obligations for publically traded and privately held corporations, with an aim to improving accountability. Canada followed suit with Bill C-198. It is identical in principle, albeit subtly varied in accountability and execution. Oversight outlined in the act includes objective mandates such as auditor independence, enhanced disclosure and criminal fraud accountability, as well as subjective mandates like corporate responsibility. Sarbanes-Oxely and C-198 place the responsibility for steering corporate governance firmly on the board of directors and upper management. Corporations become legally obligated to follow a course of social compliance. Regulation falls on the Securities and Exchange Commission. It is easy to argue that some corporations make money through dealings in conflict with what is socially acceptable to the majority, but the theoretical purpose is the legal imposition of accountability. Ethics Versus The Law The law and ethics are not one and the same. Although the law can guide ethical behaviour through Sarbanes-Oxely by laying out a framework, ethicists are quick to point out that the law should be thought of as the bare minimum of an ethical framework. Complying with the law and behaving ethically are not necessarily synonymous. While Sarbanes-Oxely and C-198 specifically state that destroying evidence or fraudulent behaviour is illegal, they do not state that the series of questionable decisions that led to the fraud is as well. To guide the behaviour of the corporation, management must turn to the field of business ethics. In the case of Volkswagen, the execution of the deceptive computer program at the EPA emissions test laboratory is where the law was broken, the act of which carries punitive fines and penalties based on the retributions of crime and punishment. ground reality of business world : the existence of business frauds It is thus observed that corporate governance principles or business ethics policies are internationally accepted policies and principles for a noble cause of promoting fairness in business dealings, equitable treatment to all and transparency and accountability in business dealings. A number of reformative actions for strengthening corporate governance were also taken in India. However, on a number of occasions, maintenance of business ethical standards have taken a beating and have fallen prey to human greed and desire to amass wealth at all costs resulting in a number of corporate frauds internationally and also in India. Bank frauds or loan defaults by corporates are grim realities today which put a question mark on practising corporate governance policies or maintenance of ethical standards by the corporate. Our economy is struggling, a number of banks have failed and the share market is highly fluid today. People’s confidence in our banking sector has received a big jolt and there are a number of cases where the persons have lost their lifetime earnings and security of future at the hands of faltering and failing banks and NBFC. People’s confidence in our banking sector as a secured mode of investment is at an all time low. To examine what is happening around us,let us took a look at a few cases which had rocked the nation and also the business world during last about 30/40 years are: Harshad Mehta Scam. Failure of Satyam as a corporate giant. YES Bank scam. DUPING BY MEHUL CHAUKSI and NIRAV Modi with active connivance of officials of Punjab National Bank (PNB). Vijay Mallya: The fugitive offender and collapse of United Breweries 6) Conclusion:-Corporate governance is essentially about how the organisations and corporations are directed, managed, controlled and held accountable to all the stakeholders. Accountability, transparency, security and responsibility are its pillars particularly in the era of globalisation and liberalisation but like in foreign countries, India has also witnessed some mega financial scams viz. Harshad Mehta Scandal, Satyam case etc. thereby throwing open the question of managing financial risks and ensuring corporate governance. As Indian companies compete globally for access to capital markets, many are finding that the ability to benchmark against world-class organizations is essential. For a long time, India was a managed, protected economy with the corporate sector operating in an insular fashion. But as restrictions have eased, Indian corporations are emerging on the world stage and discovering that the old ways of doing business are no longer sufficient in such a fast-paced global environment. In consideration of all the above facts, some preventive measures as well as punitive measures, tightening of administrative set up, enactment of new rules etc would be essentially required and in this nefarious game, sadly some big names in the world of Accountancy and Auditing firms have also been found to be involved which is also an area of grave concern. To curb and control the menace of corporate frauds is a big challenge today and it is happening principally due to non-practicing of ethical practices in business as well as non-adherence to corporate governance principles which are fast eating up into our economy. This slide is required to be at once arrested. preventive and punitive measures are not taken, the business sector and economy may collapse due to cash crunch and absence of financial liquidity sooner than later and one of the principal contributory factors for such happening shall be the non-adherence of corporate governance.REFERENCE:- Bhatia, S.K. 2004 ―Business Ethics‖ Page 1.3-1.13 edition 2007 Business Ethics and Corporate Governance Sources: https://en.wikipedia.org/wiki/Business_ethics https://www.investopedia.com/terms/b/business-ethics.asp http://www.hindustantimes.com/india/india-at-work-what-our-employees-think-of-job-ethic http://www.business-standard.com/article/current-affairs/ethical-standards-yet-to-improve-in-india-survey